So where do we go from here? The market has rallied to the upper end of what we still perceive to be a trading range and we could still see a pullback as we head into the May notice period, when cash and futures prices converge. However, a more positive tone in many of the outside markets and the threat of additional spec buying at a time when the trade seems to be fairly limited in its ability to add additional shorts make us wary of a breakout to the upside.
Our longer term outlook is becoming quite friendly, not so much because of cotton's supply/demand fundamentals, but because we believe that it is just a matter of time until the government bond market collapses, which would spark inflation and send the US dollar tumbling. The fact that the US is issuing record amounts of debt at a time when foreign bond holders are starting to get rid of US debt instruments is a recipe for trouble.